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Edited version of your written advice
Authorisation Number: 1051277091603
Date of advice: 31 August 2017
Ruling
Subject: Furnishings
Question
Are you entitled to a deduction for the purchase of items to furnish a flat that you are required to reside at as part of your employment?
Answer
No.
This ruling applies for the following periods:
Year ended 30 June 2017
Year ended 30 June 2018
Year ended 30 June 2019
Year ended 30 June 2020
The scheme commences on:
1 July 2016
Relevant facts and circumstances
You work as a boarding parent.
The school provides an unfurnished flat which is attached to the dorm where the students sleep that you are required to care for.
You are required to sleep in the flat for 11 out of 14 nights (school holidays excluded).
You also maintain a family home for your family which you also reside at when you are not required to sleep over.
As the flat is unfurnished you have purchased items such as a mattress, bed, bedding, TV, table, ironing board, cutlery, plates and other items for your personal use during your working roster at the flat.
Relevant legislative provisions
Income Tax Assessment Act 1997 Section 8-1
Reasons for decision
Section 8-1 of the Income Tax Assessment Act 1997 (ITAA 1997) allows a deduction for losses and outgoings which are incurred in the course of gaining or producing assessable income. However, no deduction is allowed where the losses or outgoings are capital, or are of a capital, private or domestic nature or another provision prevents the taxpayer from deducting it.
Based on a number of significant Court decisions it has been determined that, for an expense to satisfy the tests as set out in section 8-1 of the ITAA 1997:
● it must have the essential character of an outgoing incurred in gaining assessable income or, in other words, of an income-producing expense
● there must be a nexus between the outgoing and the assessable income so that the outgoing is incidental and relevant to the gaining of assessable income
● it is necessary to determine the connection between the particular outgoing and the operations or activities by which the taxpayer most directly gains or produces his or her assessable income.
In Lunney v. Federal Commissioner of Taxation (1958) 100 CLR 478; (1958) 11 ATD 404: (1958) 7 ATR 166 (Lunney), the principle was established that, prima facie, a taxpayer cannot deduct ordinary living expenses as they are considered to be private and domestic in nature.
In your case, you are employed as a live-in boarding parent where you are required to stay overnight at a flat which is attached to the dorm where the students sleep. Your employer provides an unfurnished flat for you to stay in and you have incurred expenses in order to furnish the flat.
While we acknowledge that you are required by your employer to stay in the flat in order for you to perform your duties and that you have had to furnish the flat yourself, we do not consider the expenses to furnish the flat are incurred in the course of carrying out your duties and that the items are not used in your duties as a boarding parent.
The fact that you purchased and maintain the items and they are used by you at your place of employment does not alter the inherently private or domestic nature of the expenses.
The expenses are a prerequisite to the earning of assessable income. They are incurred in order to enable you to earn income but are not incurred in the course of gaining or producing that income.
Therefore, the expenses you have incurred in furnishing the flat at your place of employment are not deductible under section 8-1 of the ITAA 1997.
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